In re Brown

• Decision Date: 03 May 1984
• Docket Number: Bankruptcy No. 383-00272,Adv. No. 383-0392.
• Citation: 39 BR 820
• Parties: In re Robert L. BROWN, Jr. and Earline Brown, Debtors. Robert L. BROWN, Plaintiff, v. Thomas A. SHRIVER, Jr., James S. Walsh, Jr. and Taylor F. Seat, Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Tennessee

39 B.R. 820 (1984)

In re Robert L. BROWN, Jr. and Earline Brown, Debtors.

Robert L. BROWN, Plaintiff, v. Thomas A. SHRIVER, Jr., James S. Walsh, Jr. and Taylor F. Seat, Defendants.

Bankruptcy No. 383-00272, Adv. No. 383-0392.

United States Bankruptcy Court, M.D. Tennessee.

May 3, 1984.

Steve Norris, Mayo & Norris, Nashville, Tenn., for debtors.

Jerry Lynn Smith, Asst. Atty. Gen., Nashville, Tenn., for Shriver and Walsh.

MEMORANDUM

KEITH M. LUNDIN, Bankruptcy Judge.

Once again this court must decide whether to enjoin a criminal prosecution of a debtor.¹ Because our prior cases did not address the effect of the § 524 discharge injunction on post-discharge probation revocation, we will resolve two issues: (1) whether restitution imposed as part of a criminal sentence is a debt subject to discharge in bankruptcy; and (2) if restitution can be discharged, whether the state prosecutor can be enjoined from seeking revocation of a debtor's probation because the debtor discharged a restitution award. For the reasons discussed below, the court holds that an award of restitution is a dischargeable debt in bankruptcy. On these facts, it is appropriate to enjoin the District Attorney from seeking to revoke the debtor's probation and to enjoin the defendant Taylor F. Seat ("Seat") from receiving restitution from the debtor.

The following constitute findings of fact and conclusions of law as required by Rule 7052 of the Bankruptcy Rules.

In early January 1981, the debtor, Robert L. Brown ("Brown"), drove his car into Seat's home causing approximately $1,500 in damage. Brown was criminally charged with driving under the influence. On March 10, 1981, Brown was placed in a pretrial diversion program and required to obtain alcohol treatment, to refrain from committing another alcohol-related offense, and to pay $1,500 restitution to Seat. Brown completed all phases of the diversion program except for paying the restitution. Despite failing to pay Seat, Brown was recommended for probation by Assistant District Attorney James S. Walsh, Jr. ("Walsh"). On February 19, 1982, Brown pleaded guilty to driving under the influence and was sentenced to a $50 fine (suspended), 90 days in jail (suspended), court costs, 11 months, 29 days probation, and ordered to pay restitution to Seat. Brown paid Seat $400 of the required amount. On October 1, 1982, Brown was notified to appear for a probation revocation hearing on October 15, 1982 because he "failed to make restitution payments in a timely manner to your victim, Taylor F. Seat." The hearing was continued until November 5, 1982, and again until February, 1983.

On January 31, 1983, Brown and his wife filed a joint Chapter 7 petition. Seat was scheduled as an unsecured creditor in the amount of $1,100.² The District Attorney's office was notified of the bankruptcy and the probation revocation hearing was continued until June 17, 1983. On June 17, 1983, Brown filed a complaint in this court for contempt against Thomas A. Shriver, Jr., District Attorney General for Davidson County, Tennessee, Walsh, and Seat.³ Brown requested a permanent injunction precluding all defendants from revoking Brown's probation or taking any other action to collect the discharged debt. The matter is before the court on cross-motions for summary judgment.

I. RESTITUTION AS A "NONDEBT"

The defendants assert that restitution imposed as part of a criminal sentence or as a condition of probation is not a "debt" and, therefore, is not discharged in bankruptcy.⁴ The United States Bankruptcy Court for the Western District of New York has embraced this view:

It does not appear that restitution could be considered a debt nor that a victim could be considered a creditor. With restitution, the victim has no right to payment. It is the criminal court which sets the restitution amount and if it is not paid the victim cannot proceed against the debtor to enforce payment, but instead the probation officer must report the event of nonpayment to the court which in turn determines if a violation of probation has occurred.

In re Button, 8 B.R. 692, 694 (Bkrtcy.W.D. N.Y.1981).

This court cannot accept the narrow conception of "debt" adopted in Button. The relationship memorialized by a criminal court award of restitution is not beyond the scope of "debt" for bankruptcy purposes. "Debt" dischargeable in bankruptcy is not restricted to obligations incurred in consumer or business transactions, but includes all obligations, however, incurred. 11 U.S.C.A. § 101(11) (West 1979) defines "debt" broadly as a "liability on a claim." "Claim" is broadly defined as any "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C.A. § 101(4)(A) (West 1979). The legislative history indicates that "claim" should be interpreted to foster the widest scope of debtor relief:

The definition is any right to payment . . . By this broadest possible definition, and by the use of the term throughout the title 11 . . . the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court.

H.R.REP. NO. 595, 95th Cong., 1st Sess. 309 (1977); S.REP. NO. 989, 95th Cong., 2d Sess. 21 (1978), U.S.Code Cong. & Admin. News 1978, pp. 5787, 5808, 6266. (emphasis added).

The "claim" in this case arose when Brown damaged Seat's home. The "debt," or liability on that claim, existed at that time and, like most debts, was entitled to thrive in the bankruptcy context without the intervention of any court. The debt between the debtor and Seat was fully cognizable in bankruptcy and if not within an exception to discharge, fully dischargeable in bankruptcy before the criminal court became involved. Had Seat gone into a state civil court and reduced his debt to a judgment, in the absence of an exception to discharge or dischargeability, the civil judgment, along with the debt, would have been discharged.

Herein, Seat submitted his damage estimates to the Assistant District Attorney and those estimates were incorporated into a restitution order of a criminal court. If the Bankruptcy Code said that only orders to pay money by civil courts are debts for bankruptcy purposes, then credence could be given to the defendant's argument that a criminal court restitution order does not embody a "debt" dischargeable in bankruptcy. However, nothing in the Bankruptcy Code suggests that only civil courts enter orders to pay money that are subject to discharge in bankruptcy. A restitution order by a criminal court no less acknowledges the existence of a debt than an order of a civil court reducing that claim to judgment. The fact that a criminal court might participate in enforcement or collection of the debt between victim and debtor/defendant does not make the underlying obligation a "nondebt" for bankruptcy purposes.

To win their argument, the defendants must first characterize the restitution order as being disembodied from the underlying "debt" created by Brown's actions. The defendants must then characterize the restitution order as something other than "debt" for bankruptcy purposes. What then is the restitution order? It acknowledges a "right to payment" yet defendants contend that this particular "right to payment" falls outside the notion of "right to payment" in § 101(4)(A). The restitution order confirms a "liability" of the defendant/debtor yet again, the defendants claim this particular "liability" exists beyond the notion of "liability" in § 101(11). The defendants' argument is nonsense. It requires a level of distortion of language most appropriate for the actions of legislatures and not courts. If the right of payment and the liability in a criminal court order of restitution were intended to be outside of the realm of debt for bankruptcy purposes, then how simple it would have been for Congress to include appropriate language in the Bankruptcy Code. The existence of a debt must be determined by substance not metaphysics. See Pauley v. Spong, 661 F.2d 6, 9 (2d Cir.1981); Bailey v. Wright, 584 F.2d 83, 85 (5th Cir.1978); Williams v. State of Washington, 529 F.2d 1264, 1270 (9th Cir.1976). A restitution order of a state criminal court—whether it is characterized as embodying the pre-existing debt between the victim and the defendant debtor or if it is characterized as creating a separate obligation—is a "debt" for purposes of the Bankruptcy Code and is dischargeable in bankruptcy if not otherwise excepted from discharge.

Seat did not object to the dischargeability of his claim. The exceptions to discharge are strictly construed in favor of the debtor to foster comprehensive relief and a fresh start for debtors. See, e.g., Perez v. Campbell, 402 U.S. 637, 648, 91 S.Ct. 1704, 1710, 29 L.Ed.2d 233 (1971); Gleason v. Thaw, 236 U.S. 558, 35 S.Ct. 287, 59 L.Ed. 717 (1915); Murphy & Robinson Investment Co. v. Cross, 666 F.2d 873, 879 (5th Cir.1982); Kansas State Bank and Trust Co. v. Vickers, 577 F.2d 683, 687 (10th Cir.1978); Houtman v. Mann, 568 F.2d 651, 653 (9th Cir.1978); Household Finance Co. v. Danns, 558 F.2d 114, 116 (2d Cir.1977). This court is forbidden to speculate whether the debt resulted from willful and malicious conduct by the debtor within the meaning of 11 U.S.C.A. § 523(a)(6) (West 1979).⁵ The defendants' efforts to bypass the normal routes by which claimants defeat a bankruptcy discharge must be rejected.

Strong policies urge rejection of defendants' invitation to create a new exception to discharge for restitution orders. Creditors use (and abuse) state criminal process as a technique for the collection of debt. This fact has been judicially determined by this and other courts. See, e.g., Whitaker v. Lockert, 16 B.R. 917, 922 (Bkrtcy.M.D. Tenn.1982); ...